Cambodian riel

The Cambodian riel is the national currency of Cambodia, issued by the National Bank of Cambodia. It was introduced with the country's own central bank in 1955, two years after independence, and was reissued in 1980 after the Khmer Rouge years without money. The US dollar circulates widely beside it.

Cultural object details
Object type	Currency
Period	1955 to 1975; 1980 to present
Subjects	History & Remembrance; Work & Livelihoods

Name

The origin of the name is debated. The currency shares its name with trey riel, the small river fish used to make prahok, and a popular account holds that it was named after the fish. BBC Travel in 2021 and Cultural Survival Quarterly in 2009 both gave that account. Jean-Michel Filippi, writing in the Phnom Penh Post in 2012, treated the fish as a common assumption and gave another origin. In the mid-19th century, Malay, Indian and Chinese traders in Cambodia relied heavily on the Mexican real, a coin valued for its silver, and Filippi judged the real the near-certain source of the name. The fish name itself, trey riel, translates as "fish money".

History

For most of its history, Cambodia had no currency of its own. Foreign money was used at times, but most trade was barter. Coins, gold and silver, brought in by Chinese merchants, were used to buy goods at Angkor and at trading ports by the 13th century, while farmers who grew rice traded by barter. Under the French protectorate (1863 to 1953), the piastre became the first currency used across the whole country. It was an Indochinese currency, shared with the other French territories in the region.

Independence in 1953 brought a central bank and a national currency, the riel. The National Bank of Cambodia was established in December 1954 and began full operations on January 1, 1955.

The Khmer Rouge came to power on April 17, 1975. On that day the National Bank was closed, and money and markets were abolished. Sheridan T. Prasso, a former Cambodia bureau chief of Agence France-Presse, wrote that the movement's leaders, headed by Pol Pot, had decided at a party congress in February 1975 to abolish money, markets and private property. Pol Pot had first planned to introduce a currency, and notes that were printed but never issued were found after the regime fell. Filippi wrote that the notes came from printers in China, some months ahead of the Khmer Rouge entry into Phnom Penh. In Prasso's account, Pol Pot then ordered his troops to blow up the Central Bank building with dynamite. Markets, trade, money and banks were all destroyed between 1975 and 1979, the National Bank among them.

Under Democratic Kampuchea (1975 to 1979), barter, private trade and every means of exchange were banned. Cambodia had no money and no monetary system from 1975 to 1980, and savings and cash lost all value. The physician Haing S. Ngor recorded that on the day the Khmer Rouge took Phnom Penh, he held 17 million riel in a bank, about $7,000 to $10,000; the money became worthless. Prasso wrote that the regime still needed a measure of value for foreign trade. Account books found at the Ministry of Commerce in 1994 priced exports in pounds sterling, and Pol Pot's Four-Year Plan set state spending in US dollars.

Vietnamese forces drove the Khmer Rouge from power in 1979. The central bank reopened on October 10, 1979, as the People's Bank of Cambodia. Until the riel returned, people traded by barter or paid in rice, gold, Thai baht, Vietnamese dong and US dollars. The first new riel banknotes, printed in Moscow, reached Cambodia on March 20, 1980, and the riel became the country's legal tender again that year. It replaced the Thai and Vietnamese currencies but did not displace gold, the dollar or rice. Fearing inflation, the government at first issued only small denominations, and the larger notes introduced later saw little use.

After the Paris agreements of 1991, large amounts of US dollars entered Cambodia during the United Nations operation known as UNTAC (1992 to 1993), and the National Bank could control only a small part of the money supply. Jayant Menon, an economist at the Asian Development Bank, put the total cost of UNTAC at $1.7 billion. A law of January 26, 1996, set out the organization and functions of the National Bank. Its main mission is price stability, and it issues the national currency.

Riel and the US dollar

Menon traced the wide use of the dollar to three causes: the destruction of economic and financial institutions in the 1970s, economic mismanagement in the 1980s and the dollar inflows of the early 1990s. Confidence in the riel stayed low after 1980. Prasso wrote in 2001 that every Cambodian over 30 remembered the day their savings in money became worthless. Most people kept riel only for small purchases, such as food or a taxi ride, and turned larger sums into gold, jewelry or dollars, even though riel deposits paid two or three times the interest of dollar accounts. Large purchases such as property were priced in gold, in the damleung (about 34 grams, or 1.2 ounces) and the chi (about 3.7 grams, or 0.13 ounces).

Nombulelo Duma of the International Monetary Fund wrote in 2011 that Cambodia had become the most dollarized economy in Asia over the previous decade. Foreign currency deposits rose from about 60 percent of broad money in the late 1990s to about 80 percent. Bank deposits in riel also grew fourfold from the mid-2000s. The riel was widely accepted in the countryside, where the economy was largely farming, while the cities ran mostly on dollars. Menon estimated in 2008 that the riel made up only about 10 percent of the currency in circulation. Taxes were paid in riel, a large source of demand for it.

References